The Yates Memo: DOJ Public Relations Move Or Meaningful Reform That Will End Impunity for Corporate Criminals?, 58 B.C.L
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Boston College Law Review Volume 58 | Issue 2 Article 8 4-3-2017 The aY tes Memo: DOJ Public Relations Move or Meaningful Reform That Will End Impunity for Corporate Criminals? Christopher Modlish Boston College Law School, [email protected] Follow this and additional works at: http://lawdigitalcommons.bc.edu/bclr Part of the Administrative Law Commons, Business Organizations Law Commons, Criminal Law Commons, Criminal Procedure Commons, and the Land Use Law Commons Recommended Citation Christopher Modlish, The Yates Memo: DOJ Public Relations Move or Meaningful Reform That Will End Impunity for Corporate Criminals?, 58 B.C.L. Rev. 743 (2017), http://lawdigitalcommons.bc.edu/bclr/vol58/iss2/8 This Notes is brought to you for free and open access by the Law Journals at Digital Commons @ Boston College Law School. It has been accepted for inclusion in Boston College Law Review by an authorized editor of Digital Commons @ Boston College Law School. For more information, please contact [email protected]. THE YATES MEMO: DOJ PUBLIC RELATIONS MOVE OR MEANINGFUL REFORM THAT WILL END IMPUNITY FOR CORPORATE CRIMINALS? Abstract: On September 9, 2015, former Deputy Attorney General Sally Yates issued a memorandum (the “Yates Memo”) in an attempt to address the Department of Justice’s (“DOJ”) seeming inability to prosecute the individu- als responsible for corporate crime and misconduct. The memo announced new DOJ policy regarding individual accountability for corporate fraud, wrongdoing, and other misconduct. Specifically, it identified six key policies meant to enable DOJ prosecutors to more effectively prosecute the individuals responsible for corporate misconduct. The memo, however, did not address the biggest obstacle to holding individuals accountable for criminal corporate conduct—the DOJ’s overuse of deferred prosecution and non-prosecution agreements. This Note argues that, because the Yates Memo did not specifical- ly curtail the overuse of deferred prosecution and non-prosecution agree- ments, it will not be able to achieve its stated goal of reducing impunity for the individuals responsible for corporate crime. This Note then provides poli- cy suggestions for how the DOJ could further amend its policies to address the overuse of deferred prosecution and non-prosecution agreements. INTRODUCTION In 2008, systemic corporate wrongdoing led to a global economic reces- 1 sion. Despite industry-wide transgressions and excessive risk taking in the 2 financial sector, only one executive was sent to prison. Kareem Serageldin, a 1 See generally MICHAEL LEWIS, THE BIG SHORT: INSIDE THE DOOMSDAY MACHINE (2010) (discussing the consequences of the 2008 global financial crisis as well as the details of the Wall Street financial maneuvering that caused the crisis); ANDREW ROSS SORKIN, TOO BIG TO FAIL: THE INSIDE STORY OF HOW WALL STREET AND WASHINGTON FOUGHT TO SAVE THE FINANCIAL SYSTEM—AND THEMSELVES (2009) (same); Jesse Eisinger, Why Only One Top Banker Went to Jail for the Financial Crisis, N.Y. TIMES (Apr. 30, 2014), http://www.nytimes.com/2014/05/04/ magazine/only-one-top-banker-jail-financial-crisis.html?_r=1 [https://perma.cc/HL6V-G72S] (same); Jed S. Rakoff, Why Have No High Level Executives Been Prosecuted in Connection with the Fi- nancial Crisis?, CLS BLUE SKY BLOG (Nov. 15, 2013), http://clsbluesky.law.columbia.edu/2013/ 11/15/why-have-no-high-level-executives-been-prosecuted-in-connection-with-the-financial-crisis/ [https://perma.cc/TZ2Y-NJ79] (same). 2 See Amy J. Sepinwall, Responsible Shares and Shared Responsibility: In Defense of Re- sponsible Corporate Officer Liability, 2014 COLUM. BUS. L. REV. 371, 374 (discussing the lack of accountability for those responsible for the economic crisis); Eisinger, supra note 1 (reporting on the sole executive who was imprisoned following the financial crisis); Jesse Eisinger, Why the SEC Won’t Hunt Big Dogs, PROPUBLICA (Oct. 26, 2011), http://www.propublica.org/thetrade/ 743 744 Boston College Law Review [Vol. 58:743 trader at Credit Suisse, was sentenced to thirty months for concealing millions of dollars of losses in the bank’s mortgage-backed securities portfolio.3 As the judge stated as he handed down the verdict, Serageldin’s crime was but “a small piece of an overall evil climate within [Credit Suisse] and with many other banks.”4 The failure of the U.S. Department of Justice (“DOJ”) to prosecute the in- dividuals responsible for the crimes that led to the financial collapse is not simply a well-publicized anomaly.5 Rather, it is part of a trend of declining fed- eral prosecutions of white-collar crime that started at least as early as 2008.6 Indeed, according to the DOJ’s latest figures, federal prosecutors brought fewer 7 white-collar cases in 2016 than in any of the last twenty-one years. item/why-the-sec-wont-hunt-big-dogs [https://perma.cc/CTG2-CZFE] (pointing out that no major banker was charged criminally as a result of the financial crisis); Neil Irwin, This Is a Complete List of Wall Street CEOs Prosecuted for Their Role in the Financial Crisis, WASH. POST: WONKBLOG (Sept. 12, 2013), http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/12/ this-is-a-complete-list-of-wall-street-ceos-prosecuted-for-their-role-in-the-financial-crisis/ [https:// perma.cc/B9GS-QTKM] (highlighting the fact that not one person who led one of the corporations directly responsible for the financial crisis has seen any jail time); Jason Ryan, DOJ Will Not Prosecute Goldman Sachs in Financial Crisis Probe, ABC NEWS (Aug. 9, 2012), http://abcnews. go.com/blogs/politics/2012/08/doj-will-not-prosecute-goldman-sachs-in-financial-crisis-probe/ [https://perma.cc/DHC8-T9NF] (noting that despite a number of high profile investigations into corporate wrongdoing, the Department of Justice (“DOJ”) declined to fully prosecute any respon- sible parties); Sarah White, RPT-In Post-Lehman Clean-Up, Top Banker Prosecutions Stumble, REUTERS (Sept. 14, 2013), http://www.reuters.com/article/2013/09/14/lehman-fiveyear-crime- idUSL5N0H929A20130914 [https://perma.cc/NED7-24AF] (explaining that, in the United States, no high level financial executives were criminally convicted in connection with the 2008 financial crisis). 3 Eisinger, supra note 1. Credit Suisse is a financial service provider headquartered in Swit- zerland with a focus on private banking, wealth management, and investment banking. About Us, Our Company, CREDIT SUISSE, https://www.credit-suisse.com/us/en/about-us/our-company.html [https://perma.cc/2BJY-6H36]. 4 Eisinger, supra note 1. The overall “evil climate” that consumed so many Wall Street banks and financial institutions need not be documented at length here. See, e.g., Irwin, supra note 2 (explaining the extensive negative impact of the financial crisis, as well as pointing out the lack of accountability for any of the people who caused it). There has been no shortage of reporting and analysis on the widespread misconduct committed by financial corporations such as Lehman Brothers, American International Group, Citigroup, and Merrill Lynch, among others. See, e.g., LEWIS, supra note 1 (providing a detailed analysis of the Wall Street financial manipulation that caused the crisis); SORKIN, supra note 1 (same); Eisinger, supra note 1 (same). 5 See Eisinger, supra note 1 (tracing the recent decline in the prosecution of white collar crime in the United States); Alan Pyke, Why the U.S. Isn’t Prosecuting White Collar Criminals, THINKPROGRESS (Aug. 4, 2015), http://thinkprogress.org/economy/2015/08/04/3687846/white- collar-crime-prosecution-failure/ [https://perma.cc/BE67-L8XZ] (same). 6 See Eisinger, supra note 1 (discussing the gradual fall of white collar prosecution rates in the United States); Pyke, supra note 5 (same). 7 See White Collar Crime Prosecutions for December 2016, SYRACUSE UNIVERSITY’S TRANS- ACTIONAL RECORDS ACCESS CLEARINGHOUSE (Jan. 20, 2017) http://trac.syr.edu/tracreports/ bulletins/white_collar_crime/monthlydec16/fil/ [https://perma.cc/39UD-75SQ] (explaining that DOJ white collar prosecutions in 2016 decreased by 23.9% from 2015); Federal White Collar Crime Prosecutions at 20-Year Low, SYRACUSE UNIVERSITY’S TRANSACTIONAL RECORDS AC- 2017] The Yates Memo and the DOJ’s Failure to Prosecute Corporate Crime 745 Moreover, there are no signs that this trend of declining white-collar prosecutions will abate soon.8 On March 11, 2017, the DOJ fired Preet Bha- rara, U.S. Attorney for the Southern District of New York after he refused to resign his post.9 Although Bharara was criticized for his failure to prosecute any Wall Street executives for their role in the financial crisis, he was also known for his successful prosecutions of insider trading cases.10 The South- ern District of New York is the epicenter for white-collar prosecutorial efforts in the United States.11 Bharara’s firing thus raises questions about whether white-collar prosecutions will further diminish during the Trump presiden- cy. 12 This decline in prosecution of white-collar crime is doing more than simply angering ordinary Americans who feel as though the system is fixed in favor of the wealthy and powerful.13 It is also worrying legal analysts who CESS CLEARINGHOUSE (July 29, 2015) http://trac.syr.edu/tracreports/crim/398/ [https://perma.cc/ 2NK9-A39T] (explaining that DOJ white-collar prosecutions in 2015 were at their lowest point in twenty years); see also White Collar Crime Convictions Continue to Decline, SYRACUSE UNIVER- SITY’S TRANSACTIONAL RECORDS ACCESS CLEARINGHOUSE (Apr. 7, 2016) http://trac.syr.edu/ whatsnew/email.160407.html [https://perma.cc/Z4UA-3BQ9] (providing statistical analysis of the decades long decline in DOJ white collar prosecutions); Pyke, supra note 5 (providing a general overview of the decline in white collar prosecution in the United States). Further, the U.S. gov- ernment prosecuted 36.8 percent fewer white-collar crimes in 2015 than it did in 1995.